Ms Elizabeth Tan wrote to Straits Times about her disappointment with AXA Life. She only realised that her agent 'oversold the benefits' her a policy 17 years later. I decided to write to Straits Times that many will only realised they have bought a wrong product only after 40 years! The following letter was published on 3 January 2015:
I AGREE with Ms Elizabeth Tan Boon Kwan ("Guard against overselling of insurance products"; Thursday).
Although she bought her policy before the introduction of the Financial Advisers Act in 2002, several financial advisers continue to oversell the benefits of insurance policies even today.
Investment-linked policies, for instance, are often marketed as having the benefits of both insurance and investment.
In reality, many of these policies' insurance charges rise in an exponential fashion as one ages, resulting in these policies lapsing because the policyholders are unable to continue paying the premiums and the cash values are insufficient to cover the shortfall. Many young policyholders will realise this problem only after 40 years.
Although this was highlighted in the media, little has been done except the requirement for greater disclosure in the form of more benefit illustrations.
This brings me to the next point - the amount of documentation a client needs to read and sign has become too large.
The irony is that such information overload results in the client understanding less. Of course, this is where the financial adviser steps in to advise and assist, but there is a conflict of interest.
In Singapore, financial advisers are required to recommend products based only on a "reasonable" basis; there is no fiduciary requirement.
I suggest the Government consider the model adopted in the United States, where a Registered Investment Adviser has a fiduciary duty to look after the interest of the client.
Note: Do not terminate your investment-linked policy after reading my letter. Here is why: Should you terminate your Investment Linked Policies?
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